2. WHAT IS CROSS BORDER &
INTEGRATED WEALTH
PLANNING?
Financial and Business Planning for Individuals
to determine US Tax Exposure and meet Compliance
Regulations to avoid negative consequences
such as Penalties, Double Taxation (ie: Tax Traps), etc.
Cross Border Planning to structure the Assets of
Individuals and Businesses to minimize US Tax
Exposure
3. HOW DO YOU DETERMINE
US TAX EXPOSURE…
1. Were You or your Spouse born in the US or were either of your Parents
born in the US
2. How much time do you spend in the US each year
3. Do you own Property in the US and if so, what is the Value of the Property
4. Have you ever held a Green Card in the US
Most countries tax residents only. The United States taxes both US
citizens (wherever they may be) and resident aliens
4. US TAX EXPOSURE
CONTINUED
6. Are you the Beneficiary or Trustee of a US Trust
7. Are you the Beneficiary or Executor for a US Person
5. Do you have any Income from US Sources (ie: Rental Income,
Employment)
8. Do you own US Stocks or US Property valued at $100k or more
5. WHY DOES IT MATTER
The provisions commonly known as the Foreign Account Tax
Compliance Act (FATCA) became law in March 2010.
FATCA targets tax non-compliance by U.S. taxpayers with foreign
accounts. FATCA focuses on reporting:
1. By U.S. taxpayers about certain foreign financial accounts and
offshore assets
2. By foreign financial institutions about financial accounts held by U.S.
taxpayers or foreign entities in which U.S. taxpayers hold a substantial
ownership interest
6. Under FATCA, all Financial Institutions and Investment
Companies in Canada must collect Information on
Citizenship and report that Financial Information
annually
As of July 1st, 2014 all Financial Institutions and Investment Firms
in Canada are releasing information to CRA on US Persons
Under the Inter-governmental Agreement signed with the US
Canada is releasing taxpayer information to the IRS.
7. WHAT IS A US PERSON
The term ''United States person'' (US person) includes a US citizen or resident alien of
the United States, as well as domestic corporations, estates, and partnerships. It
extends to trusts controlled by a US person or over which a US court has primary
jurisdiction
US CITIZEN
An individual is a US citizen if born in the United States, Puerto Rico, Guam or the US
Virgin Islands.A person born outside the US with at least one US citizen parent MAY
be a US citizen. Numerous factors can affect the determination, including date of birth,
application before or after age 18, years the US parent resided in the US, parents’
marital status, and more. Generally a citizen must make an intentional positive action
in order to lose/end citizenship.
An application and grant of citizenship in another country does not automatically
revoke US Citizenship
8. RESIDENT ALIEN OR NON-RESIDENT ALIEN
The US uses the term alien to mean a person who is neither a US citizen nor a US
national (this latter term applying to those born in certain US protected territories).
A resident alien is effectively subject to the same tax reporting obligations as a US
citizen, whereas a non-resident alien is generally only subject to tax on US-source
income.
A person will be considered a resident alien if either of two tests is met:
1. the Green Card Test or
2. the Substantial Presence Test
9. SUBSTANTIAL PRESENCE
TEST
Each time your Cross the Border, your # of Days in the US is calculated into
meeting the Substantial Presence Test.
The Substantial Presence Test confirms Resident Status and a Tax Filing Requirement
183 Days in the Current Year
Plus 1/3 of the Days from the Previous Year
Plus 1/6 of the Days from the Previous 2 Years
10. GREEN CARD TEST
A person is a resident alien by virtue of the green card test if the person has
been given the right to reside permanently in the US as an immigrant,
generally by the U.S. Citizenship and Immigration Services (USCIS) issuing
Form I-551, also known as a ‘green card’.
Resident status continues unless it is terminated by USCIS, or the person
makes a voluntary renunciation in writing. Accordingly, the US may consider
the person to be a resident alien for tax purposes, despite that the person no
longer resides in the US.
11. Closer Connection to Canada
Form- IRS FORM 8840
Example: If you maintain your Principle Residence in Canada and live/ work
primarily in Canada you can file a Closer Connection to Canada Form
annually with the IRS to address Residency Exposure
Despite meeting this test, a person may be treated as a non-resident alien
if proof is provided to show a closer connection to a foreign country, using
IRS Form 8840 (Closer Connection Exception Statement).
12. WHAT DO YOU HAVE TO
FILE?
1. Individual Tax Returns from 2011 to Present including Foreign Corporate Disclosure
for Business Owners/ Shareholders in Foreign Corporations
2. FBAR’s (FinCEN Form 114)- Report On Foreign Bank And Financial Accounts
for previous 6 years
UNDER THE STREAMLINED APPROACH
3. Statement Of Specified Foreign Financial Assets” for Accounts
valued at $200k USD or greater
.
13. FILING THE US TAX
RETURN
Form 1040 is used for individual income tax return fling. An annual income tax
return must be filed for any tax year in which gross income is equal to or greater
than the applicable exemption amount and standard deduction.
Form 1040 is used in combination with other Forms and Schedules to file an
Individual Tax Return
The individual filing deadline for Out of Country Individuals is June 15th
14. FILING THE FBAR
A US person who holds at least $10,000 in foreign financial accounts (including
certain foreign non-account investment assets) must make an annual filing,
irrespective of income.
The online form is Form 114 Report of Foreign Bank and Financial Accounts (FBAR).
The FBAR must be filed annually with Financial Crimes Enforcement Network
(FinCEN), a bureau within the US Department of the Treasury.
It must be received by June 30 (for reporting the preceding calendar year).
Penalties: Up to $10,000 initially, and up to $60,000 for continuing failure after IRS
notice. Criminal penalties may also apply.
15. THE OFFSHORE VOLUNTARY
DISCLOSURE PROGRAM (OVDP)
The stated IRS objective is to bring taxpayers that have used
undisclosed foreign accounts and assets, including those held through
undisclosed foreign entities, to avoid or evade tax into compliance with
United States tax and related laws.
On an OVDP filing, the IRS may waive the most severe penalties, and
criminal sanctions may be avoided. However, taxes, interest and
some penalties will still apply.
16. FILING THE SPECIFIED
FOREIGN ASSET
DISCLOSURE
Under FATCA, US taxpayers who hold an aggregate of $50,000 in
foreign accounts will be required to file a new Form 8938 Statement of
Specified Foreign Financial Assets with their annual tax return
The threshold reporting requirement for non residents is $200,000,
Penalties: Up to $10,000 if non-wilful; if willful, up to the greater of $100,000
or 50 percent of account balances. Criminal penalties may also apply
17. PASSIVE FOREIGN
INVESTMENT CORPORATION
(PFIC’S)
(PFIC) rules force disclosure of information about and income details for
certain foreign investment structures owned by US persons.
Due to an IRS policy change in 2010, non-US mutual funds held by US
persons are now considered PFICs.
18. NON-REGISTERED
CANADIAN MUTUAL FUNDS
A U.S. person holding a Canadian mutual fund is required to annually report
such holdings to the IRS using Form 8621, Information Return by a
Shareholder of a Passive Foreign Investment Company or Qualified Electing
Fund.
Failure to do so will likely result in the gains on disposition to be taxed at the
highest US tax rate at the time, with interest levied for implied underpaid taxes
during the holding period
**Where a Canadian mutual fund is held within a RRSP/RRIF, the Form 8621
disclosure and filing obligation will not apply so long as the Form 8891 filing is
kept up-to-date.**
19. REGISTERED PLANS
(RRSP’S, RIF’S, LIRA’S, LIF’S)
To benefit from the tax-sheltering in a RRSP/RRIF, a US person must
annually file Form 8891 U.S. Information Return for Beneficiaries of Certain
Canadian Registered Retirement Plans.
Form 8891 details the:
1. Contributions to a RRSP;
2. Undistributed earnings; and
3. Distributions from a plan
20. TFSA’S, RESP’S AND
RDSP’S
TAX FREE SAVINGS ACCOUNT
REGISTERED EDUCATION SAVINGS PLANS
REGISTERED DISABILITY SAVINGS PLANS
* ARE NOT TAX SHELTERED IN THE US AND THE
GROWTH IS TAXABLE *
21. AVOID INCOME TAX
TRAPS
1. Tax Free Savings Accounts (TFSA)
2. RESP and RDSP’s
3. Check Foreign Tax Credit/ Foreign Income Exclusion
before making RRSP contributions ($100,800 max for
2015)
4. Life Insurance UL (Permanent Side Funds) are Taxable
in the US and Exempt in the US
5. PFIC Cleanse
22. BUSINESS OWNERS AND
SHAREHOLDERS OF
CANADIAN CORPORATIONS
Are required for file Form 5471 Information Return of U.S. Persons With Respect
To Certain Foreign Corporations and associated Schedules annually and
attach to their Individual Tax Return
This is a very complex form and requires analysis of the Canadian Corporate
Financial Statements.
NOTE: All amounts are required to be reported in USD and the foreign exchange
conversion must be detailed (amounts to be shown in Functional Currency and USD)
23. FAILURE TO FILE- “What are
the Consequences?”
Failure to File Penalties and Interest issued by the IRS
Difficulties Crossing the US Border
Severe Penalties and possible Criminal Charges for Non-
Disclosure of Foreign Assets
24. HOW CAN WE HELP…
Analyze your US Tax Exposure
Assist with the collection of the necessary information to file the Tax Returns
and FBAR’s
Assist with obtaining Social Security Numbers, Individual Identification Numbers
Employer Identification Numbers
Prepare your US Tax Forms and FBAR’s
Re-Structure your Personal and Business assets to minimize US Tax Exposure
Prepare Estate Plan to protect your Assets in Canada/ US to minimize Estate
Tax, Fees and Complications.
25. CROSS BORDER SOLUTIONS
& INTEGRATED WEALTH
PLANNING
WWW.KELLERFINANCIAL.CA
Interactive Screening Tool for US Tax Exposure
Interactive Software for US Tax Self Filing specific to Cross
Border Canadian Tax Payers.
26. NOTICE:
This presentation is the property of Keller Financial & Business Planning
and Cross Border Solutions & Integrated Wealth
It may not be reproduced or distributed without permission.
